Under the TRAI Act of 1997, the Authority has been vested with the powers to formulate tariffs of all telecommunication services such as basic phones, cellular and other value added services. TRAI was given this mandate with a view to promoting fair competition between private service operators who are now in the field of telecommunications to compete with DoT.

The new tariff structure proposed by the TRAI may cut down surplus revenue generation by over 30 per cent besides hampering the growth of telephone density, several service providers havesubmitted to TRAI. The DoT has also informed the TRAI that its surplus revenue generation may be affected by 38 to 55 per cent, while the basic private operators such as Bharti and Essar submitted to TRAI that their surplus revenue may go down by 30 per cent.

According to a status report released by TRAI on the consultation process on tariff, the DoT has submitted to it that lesser surplus revenue generation can hamper its reinvestment process since 65 to 70 per cent of such resources have to be mobilised internally.